Amos Nathan Tversky
March 16, 1937
|Died||June 2, 1996 59) (aged|
|Alma mater|| University of Michigan |
|Known for|| Prospect theory |
Heuristics and biases
|Awards|| MacArthur Award |
Grawemeyer Award in Psychology (2003)
|Fields||Cognitive psychology, Behavioral economics|
|Institutions|| Hebrew University |
|Doctoral students||Maya Bar-Hillel|
Amos Nathan Tversky (Hebrew : עמוס טברסקי; March 16, 1937 – June 2, 1996) was an Israeli cognitive and mathematical psychologist, a student of cognitive science, a collaborator of Daniel Kahneman, and a key figure in the discovery of systematic human cognitive bias and handling of risk.
Much of his early work concerned the foundations of measurement. He was co-author of a three-volume treatise, Foundations of Measurement. His early work with Kahneman focused on the psychology of prediction and probability judgment; later they worked together to develop prospect theory, which aims to explain irrational human economic choices and is considered one of the seminal works of behavioral economics. Six years after Tversky's death, Kahneman received the 2002 Nobel Memorial Prize in Economic Sciences for the work he did in collaboration with Amos Tversky.(The prize is not awarded posthumously.) Kahneman told The New York Times in an interview soon after receiving the honor: "I feel it is a joint prize. We were twinned for more than a decade." Tversky also collaborated with many leading researchers including Thomas Gilovich, Itamar Simonson, Paul Slovic and Richard Thaler. A Review of General Psychology survey, published in 2002, ranked Tversky as the 93rd most cited psychologist of the 20th century, tied with Edwin Boring, John Dewey, and Wilhelm Wundt.
Tversky was born in Haifa, British Palestine (now Israel), as son of the Polish-born veterinarian Yosef Tversky and Lithuanian Jewish Jenia Tversky (née Ginzburg), a social worker who later became member of parliament for the Mapai (worker's party).Tversky had one sister, Ruth, thirteen years his senior. In high school, Tversky took classes from literary critic Baruch Kurzweil, and befriended classmate Dahlia Ravikovich, who would become an award-winning poet. During this time, he was also a member and leader in Nahal, a youth movement meant to combine farming and military service.
Tversky served with distinction in the Israel Defense Forces as a paratrooper, rising to the rank of captain and being decorated for bravery.He parachuted in combat zones during the Suez Crisis in 1956, commanded an infantry unit during the Six-Day War in 1967, and served in a psychology field unit during the Yom Kippur War in 1973.
In 1963, Tversky married American psychologist Barbara Gans, now a professor in the human development department at Teachers College, Columbia University.They had three children together.
Tversky received his bachelor's degree from Hebrew University of Jerusalem in Israel in 1961, and his doctorate from the University of Michigan in Ann Arbor in 1965. He later taught at Hebrew University before joining the faculty of Stanford University in 1978, where he spent the rest of his career. In 1980 he became a fellow of the American Academy of Arts and Sciences.In 1984 he was a recipient of the MacArthur Fellowship, and in 1985 he was elected to the National Academy of Sciences. Tversky, co-recipient with Daniel Kahneman, earned the 2003 University of Louisville Grawemeyer Award for Psychology. He died of a metastatic melanoma in 1996. He was a Jewish atheist.
Amos Tversky's most influential work was done with his longtime collaborator, Daniel Kahneman, in a partnership that began in the late 1960s. Their work explored the biases and failures in rationality continually exhibited in human decision-making.Starting with their first paper together, "Belief in the Law of Small Numbers", Kahneman and Tversky laid out eleven "cognitive illusions" that affect human judgment, frequently using small-scale empirical experiments that demonstrate how subjects make irrational decisions under uncertain conditions. This work was highly influential in the field of economics, which had largely presumed rationality of all actors.
Tversky and Fox (1995) — but not when one is ignorant of this comparison.addressed ambiguity aversion, the idea that people do not like ambiguous gambles or choices with ambiguity, with the comparative ignorance framework. Their idea was that people are only ambiguity averse when their attention is specifically brought to the ambiguity by comparing an ambiguous option to an unambiguous option. For instance, people are willing to bet more on choosing a correct colored ball from an urn containing equal proportions of black and red balls than an urn with unknown proportions of balls when evaluating both of these urns at the same time. However, when evaluating them separately, people are willing to bet approximately the same amount on either urn. Thus, when it is possible to compare the ambiguous gamble to an unambiguous gamble people are averse
As recounted by Malcolm Gladwell in 2013's David and Goliath: Underdogs, Misfits, and the Art of Battling Giants , Tversky's peers thought so highly of him that they devised a tongue-in-cheek one-part test for measuring intelligence. As related to Gladwell by psychologist Adam Alter, the Tversky intelligence test was "The faster you realized Tversky was smarter than you, the smarter you were."
Michael Lewis's book The Undoing Project: A Friendship That Changed Our Minds , released on December 16, 2016, is about Amos Tversky and Daniel Kahneman, and is the "story of their lives and work together".
A cognitive bias is a systematic pattern of deviation from norm or rationality in judgment. Individuals create their own "subjective reality" from their perception of the input. An individual's construction of reality, not the objective input, may dictate their behavior in the world. Thus, cognitive biases may sometimes lead to perceptual distortion, inaccurate judgment, illogical interpretation, or what is broadly called irrationality.
A heuristictechnique, or a heuristic, is any approach to problem solving or self-discovery that employs a practical method that is not guaranteed to be optimal, perfect, or rational, but is nevertheless sufficient for reaching an immediate, short-term goal or approximation. Where finding an optimal solution is impossible or impractical, heuristic methods can be used to speed up the process of finding a satisfactory solution. Heuristics can be mental shortcuts that ease the cognitive load of making a decision.
Daniel Kahneman is an Israeli psychologist and economist notable for his work on the psychology of judgment and decision-making, as well as behavioral economics, for which he was awarded the 2002 Nobel Memorial Prize in Economic Sciences. His empirical findings challenge the assumption of human rationality prevailing in modern economic theory.
Behavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals and institutions and how those decisions vary from those implied by classical economic theory.
Prospect theory is a theory of behavioral economics and behavioral finance that was developed by Daniel Kahneman and Amos Tversky in 1979. The theory was cited in the decision to award Kahneman the 2002 Nobel Memorial Prize in Economics.
The representativeness heuristic is used when making judgments about the probability of an event under uncertainty. It is one of a group of heuristics proposed by psychologists Amos Tversky and Daniel Kahneman in the early 1970s as "the degree to which [an event] (i) is similar in essential characteristics to its parent population, and (ii) reflects the salient features of the process by which it is generated". Heuristics are described as "judgmental shortcuts that generally get us where we need to go – and quickly – but at the cost of occasionally sending us off course." Heuristics are useful because they use effort-reduction and simplification in decision-making.
Loss aversion is the tendency to prefer avoiding losses to acquiring equivalent gains. The principle is prominent in the domain of economics. What distinguishes loss aversion from risk aversion is that the utility of a monetary payoff depends on what was previously experienced or was expected to happen. Some studies have suggested that losses are twice as powerful, psychologically, as gains. Loss aversion was first identified by Amos Tversky and Daniel Kahneman.
In economics, game theory, and decision theory, the expected utility hypothesis—concerning people's preferences with regard to choices that have uncertain outcomes (probabilistic)—states that the subjective value associated with an individual's gamble is the statistical expectation of that individual's valuations of the outcomes of that gamble, where these valuations may differ from the dollar value of those outcomes. The introduction of St. Petersburg Paradox by Daniel Bernoulli in 1738 is considered the beginnings of the hypothesis. This hypothesis has proven useful to explain some popular choices that seem to contradict the expected value criterion, such as occur in the contexts of gambling and insurance.
In prospect theory, the pseudocertainty effect is the tendency for people to perceive an outcome as certain while it is actually uncertain in multi-stage decision making. The evaluation of the certainty of the outcome in a previous stage of decisions is disregarded when selecting an option in subsequent stages. Not to be confused with certainty effect, the pseudocertainty effect was discovered from an attempt at providing a normative use of decision theory for the certainty effect by relaxing the cancellation rule.
The disposition effect is an anomaly discovered in behavioral finance. It relates to the tendency of investors to sell assets that have increased in value, while keeping assets that have dropped in value.
Cumulative prospect theory (CPT) is a model for descriptive decisions under risk and uncertainty which was introduced by Amos Tversky and Daniel Kahneman in 1992. It is a further development and variant of prospect theory. The difference between this version and the original version of prospect theory is that weighting is applied to the cumulative probability distribution function, as in rank-dependent expected utility theory but not applied to the probabilities of individual outcomes. In 2002, Daniel Kahneman received the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel for his contributions to behavioral economics, in particular the development of Cumulative Prospect Theory (CPT).
In psychology, the human mind is considered to be a cognitive miser due to the tendency of people to think and solve problems in simpler and less effortful ways rather than in more sophisticated and more effortful ways, regardless of intelligence. Just as a miser seeks to avoid spending money, the human mind often seeks to avoid spending cognitive effort. The cognitive miser theory is an umbrella theory of cognition that brings together previous research on heuristics and attributional biases to explain how and why people are cognitive misers.
Hersh Shefrin is a Canadian economist best known for his pioneering work in behavioral finance.
Heuristics are simple strategies or mental processes that humans, animals, organizations and machines use to quickly form judgments, make decisions, and find solutions to complex problems. This happens when an individual focuses on the most relevant aspects of a problem or situation to formulate a solution.
The certainty effect is the psychological effect resulting from the reduction of probability from certainty to probable. It is an idea introduced in prospect theory.
Thinking, Fast and Slow is a best-selling book published during 2011 by Nobel Memorial Prize in Economic Sciences laureate Daniel Kahneman. It was the 2012 winner of the National Academies Communication Award for best creative work that helps the public understanding of topics of behavioral science, engineering and medicine.
Insensitivity to sample size is a cognitive bias that occurs when people judge the probability of obtaining a sample statistic without respect to the sample size. For example, in one study subjects assigned the same probability to the likelihood of obtaining a mean height of above six feet [183 cm] in samples of 10, 100, and 1,000 men. In other words, variation is more likely in smaller samples, but people may not expect this.
Cognitive bias mitigation is the prevention and reduction of the negative effects of cognitive biases – unconscious, automatic influences on human judgment and decision making that reliably produce reasoning errors.
The end-of-the-day betting effect is a cognitive bias reflected in the tendency for bettors to take gambles with higher risk and higher reward at the end of their betting session to try to make up for losses. William McGlothlin (1956) and Mukhtar Ali (1977) first discovered this effect after observing the shift in betting patterns at horserace tracks. Mcglothlin and Ali noticed that people are significantly more likely to prefer longshots to conservative bets on the last race of the day. They found that the movement towards longshots, and away from favorites, is so pronounced that some studies show that conservatively betting on the favorite to show in the last race is a profitable bet despite the track’s take.
David Gal is Professor of Marketing at the University of Illinois at Chicago. He is best known for his critiques of behavioral economics, and in particular his critique of the behavioral economics concept of loss aversion. His forthcoming book is titled The Power of the Status Quo.